Finance Act 2024

• (a) before paragraph (a) insert—

(za) references to a trade, profession or vocation in relation to which the cash basis applies are to a trade, profession or vocation the profits of which are required by virtue of section 24A(1) of ITTOIA 2005 to be calculated on the cash basis,

;

• (b) in paragraph (a), for the words from “calculating”, in the second place it occurs, to “effect” substitute “doing so in accordance with section 24A of ITTOIA 2005”.

40

In section 4(2ZA)(a) (capital expenditure)—

• (a) for “an election under section 25A of ITTOIA 2005 has effect” substitute “the cash basis applies”;

• (b) at the end insert “(see section 24A of ITTOIA 2005)”.

41

In section 66A(6) (persons leaving cash basis)—

• (a) in paragraph (a), for “an election under section 25A had effect” substitute “the cash basis applied”;

• (b) in paragraph (b), for “such an election does not have effect” substitute “the cash basis does not apply”.

42

• (1) Section 431D (persons leaving cash basis) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (b), for “an election under section 25A of ITTOIA 2005 (cash basis for trades) has effect” substitute “the cash basis applies”;

• (b) in paragraph (d), for “an election under section 25A of that Act had not had effect” substitute “the cash basis had not applied”.

• (3) In subsection (4)—

• (a) in paragraph (a), for “an election under section 25A of ITTOIA 2005 had effect” substitute “the cash basis applied”;

• (b) in paragraph (b), for “such an election does not have effect” substitute “the cash basis does not apply”.

• (4) After subsection (4) insert—

(4A) Subsection (11)(za) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.

43

• (1) Section 462A (persons leaving cash basis) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (b), for “an election under section 25A of ITTOIA 2005 (cash basis for trades) has effect” substitute “the cash basis applies”;

• (b) in paragraph (d), for “an election under section 25A of that Act had not had effect” substitute “the cash basis had not applied”.

• (3) In subsection (5)—

• (a) in paragraph (a), for “an election under section 25A of ITTOIA 2005 had effect” substitute “the cash basis applied”;

• (b) in paragraph (b), for “such an election does not have effect” substitute “the cash basis does not apply”.

• (4) After subsection (4) insert—

(4A) Subsection (11)(za) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.

44

• (1) Section 477A (persons leaving cash basis) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (b), for “an election under section 25A of ITTOIA 2005 (cash basis for trades) has effect” substitute “the cash basis applies”;

• (b) in paragraph (d), for “an election under section 25A of that Act had not had effect” substitute “the cash basis had not applied”.

• (3) In subsection (5)—

• (a) in paragraph (a), for “an election under section 25A of ITTOIA 2005 had effect” substitute “the cash basis applied”;

• (b) in paragraph (b), for “such an election does not have effect” substitute “the cash basis does not apply”.

• (4) After subsection (5) insert—

(5A) Subsection (11)(za) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.

Application of Pillar Two rules to members of a group

45

• (1) ITA 2007 is amended as follows—

• (2) In section 64(8) (deduction of losses from general income), omit paragraph (bb).

• (3) In section 72(5) (relief for individuals for losses in first 4 years of trade), omit paragraph (bb).

Consequential repeals

46

In consequence of the repeals made by this Schedule, omit the following provisions (which insert or amend provisions repealed by this Schedule)—

• (a) in Part 1 of Schedule 4 to FA 2013, paragraphs 3, 4, 10, 14, 15 and 39(3),

• (b) in Part 2 of that Schedule, paragraphs 44 and 54, and

• (c) paragraph 6 of Chapter 3A of Part 1 of Schedule 1 to FA 2022.

Part 3 — Commencement and transitional provision

Commencement

47

The amendments made by this Schedule have effect for the tax year 2024-25 and subsequent tax years.

Transitional provision

48

• (1) This paragraph has effect for the purposes of construing references in the Income Tax Acts to the cash basis in relation to the calculation of the profits of a trade (but not a property business) for a tax year before 2024-25.

• (2) Any reference to calculating the profits of a trade on the cash basis is to be read as a reference to doing so in accordance with section 25A of ITTOIA 2005.

• (3) Any reference to the cash basis applying (or not applying) in relation to a trade for the tax year is to be read as a reference to an election under section 25A of ITTOIA 2005 having effect (or not having effect) in relation to the trade for the tax year.

49

• (1) This paragraph has effect for the purposes of construing references in the Income Tax Acts to a change in the basis of calculation of the profits of a trade (but not a property business) for the tax year 2024-25.

• (2) A person carrying on a trade “enters the cash basis” in relation to the trade in the tax year 2024-25 if—

• (a) the cash basis applies in relation to the trade for the tax year 2024-25, and

• (b) no election under section 25A of ITTOIA 2005 had effect in relation to the trade for the tax year 2023-24,

and related expressions are to be construed accordingly.

• (3) A person carrying on a trade “leaves the cash basis” in relation to the trade in the tax year 2024-25 if—

• (a) an election under section 25A of ITTOIA 2005 had effect in relation to the trade for the tax year 2023-24, and

• (b) the cash basis does not apply in relation to the trade for the tax year 2024-25,

and related expressions are to be construed accordingly.

• (4) For the purposes of this paragraph, the cash basis applies to a trade in relation to a tax year if the profits of the trade for the tax year are required by virtue of section 24A(1) of ITTOIA 2005 to be calculated in accordance with that section.

50

Paragraphs 48 and 49 apply to professions and vocations as they apply to trades.

Schedule 11

Part 1 — Depositary receipts and clearance services

Introduction

1

FA 1986 is amended as follows.

Stamp duty

2

In section 67 (stamp duty: depositary receipts)—

• (a) in the heading, at the end insert “1.5% charge”;

• (b) in subsection (1) omit “(other than a bearer instrument)”;

• (c) after that subsection insert—

(1A) For the purposes of subsection (1) “instrument” does not include— (a) a bearer instrument (see subsection (9A)); (b) an exempt capital-raising instrument (see section 72ZA); (c) an exempt listing instrument (see section 72ZB).

;

• (d) after subsection (9) insert—

(9ZA) Where an instrument transfers shares in a company which are held by the company (whether in accordance with section 724 of the Companies Act 2006 (treasury shares) or otherwise), subsections (2) to (5) do not apply and stamp duty is not chargeable on the instrument.

3

In section 69 (depositary receipts: supplementary), in subsection (1), in the words before paragraph (a), for “sections 67 and 68 above” substitute “sections 67, 68 and 72ZB”.

4

In section 70 (stamp duty: clearance services)—

• (a) in the heading, at the end insert “1.5% charge”;

• (b) in subsection (1) omit “(other than a bearer instrument)”;

• (c) after that subsection insert—

(1A) For the purposes of subsection (1) “instrument” does not include— (a) a bearer instrument (see subsection (9A)); (b) an exempt capital-raising instrument (see section 72ZA); (c) an exempt listing instrument (see section 72ZB).

;

• (d) after subsection (9) insert—

(9ZA) Where an instrument transfers shares in a company which are held by the company (whether in accordance with section 724 of the Companies Act 2006 (treasury shares) or otherwise), subsections (2) to (5) do not apply and stamp duty is not chargeable on the instrument.

5

After section 72 (clearance services: supplementary) insert—

(72ZA) (1) For the purposes of sections 67 and 70, an instrument is an “exempt capital-raising instrument” if the instrument transfers relevant securities in the course of capital-raising arrangements. (2) In this section, “capital-raising arrangements” means arrangements pursuant to which relevant securities are issued by a company for the purpose of raising new capital. (3) An instrument is not prevented from being an exempt capital-raising instrument by reason only of a delay in transferring relevant securities where— (a) a person (“the transferor”) acquires the relevant securities— (i) before capital-raising arrangements are entered into, or (ii) in the course of capital-raising arrangements, (b) the transferor is subject to a restriction that has the effect of preventing the transfer of the relevant securities in the course of the capital-raising arrangements, and (c) the instrument transfers the relevant securities as soon as reasonably practicable after the time at which the restriction ceases to have effect. (72ZB) (1) For the purposes of sections 67 and 70, an instrument is an “exempt listing instrument” if— (a) the instrument transfers relevant securities of a company in the course of qualifying listing arrangements, and (b) those arrangements do not affect the beneficial ownership of the relevant securities. (2) In this section, “listing arrangements” means arrangements pursuant to which relevant securities, or depositary receipts for relevant securities, are listed on a recognised stock exchange. (3) For the purposes of this section, listing arrangements are “qualifying” if, immediately before the first transfer of relevant securities in the course of the listing arrangements, no relevant securities in the company or depositary receipts for relevant securities in the company are listed on the recognised stock exchange to which the listing arrangements relate. (4) An instrument is not prevented from being an exempt listing instrument by reason only of a delay in transferring relevant securities where— (a) a person (“the transferor”) acquires the relevant securities before qualifying listing arrangements are entered into, (b) the transferor is subject to a restriction that has the effect of preventing the transfer of the relevant securities in the course of the qualifying listing arrangements, and (c) the instrument transfers the relevant securities as soon as reasonably practicable after the time at which the restriction ceases to have effect. (5) Section 1005 of the Income Tax Act 2007 (meaning of “recognised stock exchange”, “listed” etc) applies in relation to this section as it applies in relation to the Income Tax Acts.

Stamp duty reserve tax

6

• (1) Section 90 (section 87: other exceptions) is amended as follows.

• (2) In subsection (3C)—

• (a) at the end of paragraph (a) insert “and”;

• (b) omit paragraph (b).

• (3) In subsection (3E) omit paragraph (b).

• (4) In subsection (4)—

• (a) the words from “falling within” to the end become paragraph (a);

• (b) after that paragraph insert

, or (b) which would fall within section 93(1) or section 96(1) if the references in section 93 or section 96 (as the case may be) to the transfer of chargeable securities included the issue of chargeable securities.

7

• (1) In the italic heading before section 93 (SDRT: depositary receipts), at the end insert “: depositary receipts”.

• (2) In section 93—

• (a) in the heading, at the end insert “: 1.5% charge”;

• (b) in subsection (1)—

• (i) in the words before paragraph (a) omit “Subject to subsection (7) below and section 95 below,”;

• (ii) in paragraph (b) omit “or issued”;

• (c) after that subsection insert—

(1A) The following provisions contain exceptions to the charge to stamp duty reserve tax under this section— (a) subsection (7) of this section (exception so far as stamp duty is chargeable); (b) section 95 (general exceptions); (c) section 95A (replacement securities); (d) section 97AB (exempt capital-raising transfers); (e) section 97AC (exempt listing transfers); (f) section 97AD (exception for transfers of shares held by issuing company); (g) section 97B (transfers between depositary receipt system and clearance system).

;

• (d) in subsection (4) omit paragraph (a);

• (e) omit subsection (10).

8

In section 94 (depositary receipts: supplementary), in subsection (1), in the words before paragraph (a), for “section 93 above” substitute “sections 93 and 97AC”.

9

In section 95 (depositary receipts: exceptions)—

• (a) in subsection (1), in the words after paragraph (b) omit “subject to section 97C,”;

• (b) in subsection (2), in the words before paragraph (a) omit “, issue”;

• (c) omit subsections (3) to (5);

• (d) omit subsection (7).

10

In section 95A (depositary receipts: exception for replacement securities)—

• (a) in subsection (1) omit “, issue”;

• (b) in subsection (3)—

• (i) in paragraph (a), in the words before sub-paragraph (i) omit “, issue”;

• (ii) in paragraph (b) omit “or (3)”;

• (c) in subsection (4), in paragraph (a) omit “, issued”.

11

• (1) Before section 96 (SDRT: clearance services) insert—

.

• (2) In section 96—

• (a) in the heading, at the end insert “: 1.5% charge”;

• (b) in subsection (1)—

• (i) in the words before paragraph (a) omit “Subject to subsection (5) below and sections 97 and 97A below,”;

• (ii) in paragraph (b) omit “or issued”;

• (c) after that subsection insert—

(1A) The following provisions contain exceptions to the charge to stamp duty reserve tax under this section— (a) subsection (5) of this section (exception so far as stamp duty is chargeable); (b) section 97 (general exceptions); (c) section 97ZA (exception for replacement securities); (d) section 97A (election for alternative system of charge); (e) section 97AB (exempt capital-raising transfers); (f) section 97AC (exempt listing transfers); (g) section 97AD (exception for transfers of shares held by issuing company); (h) section 97B (transfers between depositary receipt system and clearance system).

;

• (d) in subsection (2) omit paragraph (a);

• (e) omit subsection (8).

12

• (1) Section 97 (clearance services: exceptions) is amended as follows.

• (2) In subsection (1), in the words after paragraph (b) omit “subject to section 97C,”.

• (3) In subsection (3), in the words before paragraph (a) omit “or issue”.

• (4) Omit subsections (4) to (6).

13

• (1) Section 97AA (clearance services: further exception) is renumbered section 97ZA.

• (2) In that section—

• (a) in the heading, for “further exception” substitute “exception for replacement securities”;

• (b) in subsection (1) omit “or issue”;

• (c) in subsection (3)—

• (i) in paragraph (a), in the words before sub-paragraph (i) omit “or issue”;

• (ii) in paragraph (b) omit “or (4)”;

• (d) in subsection (4), in paragraph (a) omit “or issued”.

14

• (1) Section 97A (clearance services: election for alternative system of charge) is amended as follows.

• (2) In subsection (3), in paragraph (a) omit “or issue”.

• (3) In subsection (4), in both places omit “, issue”.

15

After section 97A insert—

(97AB) (1) There is to be no charge to tax under section 93 or 96 in respect of an exempt capital-raising transfer. (2) For the purposes of subsection (1), a transfer of chargeable securities is an “exempt capital-raising transfer” if the transfer is in the course of capital-raising arrangements. (3) In this section, “capital-raising arrangements” means arrangements pursuant to which chargeable securities are issued by a company for the purpose of raising new capital. (4) A transfer of chargeable securities is not prevented from being an exempt capital-raising transfer by reason only of a delay in transferring the chargeable securities where— (a) a person (“the transferor”) acquires the chargeable securities— (i) before capital-raising arrangements are entered into, or (ii) in the course of capital-raising arrangements, (b) the transferor is subject to a restriction that has the effect of preventing the transfer of the chargeable securities in the course of the capital-raising arrangements, and (c) the transfer is made as soon as reasonably practicable after the time at which the restriction ceases to have effect. (97AC) (1) There is to be no charge to tax under section 93 or 96 in respect of an exempt listing transfer. (2) For the purposes of subsection (1), a transfer of chargeable securities issued by a company is an “exempt listing transfer” if— (a) it is a transfer in the course of qualifying listing arrangements, and (b) those arrangements do not affect the beneficial ownership of the chargeable securities. (3) In this section, “listing arrangements” means arrangements pursuant to which chargeable securities, or depositary receipts for chargeable securities, are listed on a recognised stock exchange. (4) For the purposes of this section, listing arrangements are “qualifying” if, immediately before the first transfer of chargeable securities in the course of the listing arrangements, no chargeable securities in the company or depositary receipts for chargeable securities in the company are listed on the recognised stock exchange to which the listing arrangements relate. (5) A transfer of chargeable securities is not prevented from being an exempt listing transfer by reason only of a delay in transferring the chargeable securities where— (a) a person (“the transferor”) acquires the chargeable securities before qualifying listing arrangements are entered into, (b) the transferor is subject to a restriction that has the effect of preventing the transfer of the chargeable securities in the course of the qualifying listing arrangements, and (c) the transfer is made as soon as reasonably practicable after the time at which the restriction ceases to have effect. (6) Section 1005 of the Income Tax Act 2007 (meaning of “recognised stock exchange”, “listed” etc) applies in relation to this section as it applies in relation to the Income Tax Acts. (97AD) There is to be no charge to tax under section 93 or 96 in respect of a transfer of shares in a company which are held by the company (whether in accordance with section 724 of the Companies Act 2006 (treasury shares) or otherwise).

16

In section 97B (transfer between depositary receipt system and clearance system) omit subsection (1A).

17

Omit section 97C (transfers to non-EU depositary receipt and clearance services systems).

Part 2 — Bearer instruments

18

In section 79 of FA 1986 (stamp duty: loan capital: new provisions), in subsection (2)—

• (a) omit “on the issue of an instrument which relates to loan capital or”;

• (b) for “such an instrument” substitute “an instrument which relates to loan capital”.

19

• (1) Schedule 15 to FA 1999 (stamp duty: bearer instruments) is amended as follows.

• (2) Omit paragraph 1 (charge on issue of instrument) and the italic heading before it.

• (3) In paragraph 2 (charge on transfers of stock by means of instrument), in the words before paragraph (a) omit “duty was not chargeable under paragraph 1 on the issue of the instrument and”.

• (4) In paragraph 4 (1.5% rate of duty) omit “or 6”.

• (5) Omit paragraph 7 (ascertainment of market value for charge on issue of instrument).

• (6) In paragraph 17 (exemption for issue of instruments relating to non-sterling stock), in sub-paragraph (1)—

• (a) in the words before paragraph (a) omit “the issue of”;

• (b) omit the words after paragraph (b).

• (7) Omit the italic heading before paragraph 21.

• (8) Omit paragraph 21 (procedure for stamping instruments where duty chargeable on issue).

• (9) Omit paragraph 22 (consequences of default in complying with procedure for stamping).

Part 3 — Minor and consequential amendments

20

In section 131 of FA 1976 (Inter-American Development Bank), in subsection (3) omit “on the issue of any instrument by the Bank or”.

21

• (1) In section 126 of FA 1984 (tax exemptions in relation to designated international organisations), subsection (3) is amended as follows.

• (2) In paragraph (c) omit “on the issue of any instrument by the organisation or”.

• (3) Omit paragraph (d).

22

In section 99 of FA 1986 (interpretation), in subsection (10), in the words before paragraph (a), for “97AA” substitute “97ZA”.

23

• (1) Section 50 of FA 1987 (warrants to purchase Government stock etc) is amended as follows.

• (2) In subsection (2)—

• (a) omit paragraph (a);

• (b) in paragraph (b), for “such an instrument” substitute “an instrument which relates to an interest, right or option within subsection (1)”.

• (3) In subsection (3)—

• (a) omit paragraph (b);

• (b) in paragraph (c), for “under that Schedule” substitute “under Schedule 15 to the Finance Act 1999 (stamp duty: bearer instruments)”.

24

• (1) Section 143 of FA 1988 (stamp duty: paired shares) is amended as follows.

• (2) Omit subsections (2) and (3).

• (3) In subsection (5), in paragraph (a), for “such as is mentioned in subsection (3)(a) above” substitute “for sale of such units to the public made at the same time and at a broadly equivalent price in a country other than the United Kingdom or the foreign country”.

Part 4 — Commencement and transitional provision

Commencement

25

The amendments made by this Schedule have effect—

• (a) as they apply for the purposes of stamp duty, in relation to instruments executed on or after 1 January 2024;

• (b) as they apply for the purposes of stamp duty reserve tax, in relation to—

• (i) agreements to transfer chargeable securities made on or after that day;

• (ii) the transfer or issue of chargeable securities on or after that day.

Transitional provision: depositary receipts: exception from SDRT for replacement securities

26

• (1) This paragraph applies for the purposes of section 95A of FA 1986 (depositary receipts: exception for replacement securities) where the securities mentioned in subsection (3)(a) of that section were issued before 1 January 2024.

• (2) The amendments made by paragraphs 7 and 10 are to be disregarded.

Transitional provision: clearance services: exception from SDRT for replacement securities

27

• (1) This paragraph applies for the purposes of section 97ZA of FA 1986 (clearance services: exception for replacement securities) where the securities mentioned in subsection (3)(a) of that section were issued before 1 January 2024.

• (2) The amendments made by paragraphs 11 and 13 are to be disregarded.

Transitional provision: bearer instruments

28

• (1) Sub-paragraph (2) applies in relation to bearer instruments issued before 1 January 2024—

• (a) in the United Kingdom, or

• (b) outside the United Kingdom by or on behalf of a UK company.

• (2) The amendment made by paragraph 19(3) is to be disregarded.

• (3) In sub-paragraph (1) “bearer instrument” and “UK company” have the same meaning as in Schedule 15 to FA 1999 (see paragraphs 3 and 11 of that Schedule).

• (4) Sub-paragraph (5) applies in relation to UK bearer instruments within the meaning of section 99(1A) of FA 1986 issued before 1 January 2024.

• (5) The amendments made by paragraph 6(2) and (3) are to be disregarded.

Transitional provision: warrants to purchase Government stock etc

29

• (1) This paragraph applies in relation to securities constituted by or transferable by means of an instrument issued before 1 January 2024.

• (2) The amendments made by paragraph 23 are to be disregarded.

Schedule 12

Part 1 — Introduction

1

• (1) F(No.2)A 2023 is amended in accordance with Parts 2 to 4 of this Schedule.

• (2) The amendments made by those Parts have effect for accounting periods beginning on or after 31 December 2023.

Part 2 — Multinational top-up tax

Partnerships

2

• (1) In section 122 (chargeable persons)—

• (a) in subsection (1)(a)(ii), omit “that is not a body corporate”,

• (b) in subsection (2)(c)(ii), omit “that is not a body corporate”, and

• (c) omit subsections (4) to (6).

• (2) After section 232, insert—

(232A) (1) A partnership is to be regarded for the purposes of this Part as continuing to be the same partnership regardless of a change in membership, provided that a person who was a member before the change remains a member after the change. (2) Where— (a) ownership interests in a partnership are transferred to more than one individual or entity, and (b) the result is a partnership of which none of the original partners are members, that new partnership is to be treated as if it were the same partnership as the old partnership. (3) Where a partnership is otherwise dissolved in an accounting period— (a) the partnership is to be treated as a continuing entity for the purpose of dealing with its rights and obligations under this Part in respect of that accounting period and previous accounting periods, and (b) for the purposes of Schedule 14 (administration) each person who was a partner in that accounting period (before the partnership’s dissolution) is to be treated as a partner of the continuing entity. (4) The reference in subsection (2) to a transfer of ownership interests includes any series of transactions having the effect of a transfer (including by way of the cancellation of interests and the issue of corresponding interests).

• (3) In section 259 (other definitions), in subsection (1) at the appropriate place insert—

• “partnership” does not include anything that is a body corporate;

• (4) After section 268 insert—

(268A) Section 232A (partnerships) applies for the purposes of this Part as it applies for the purposes of Part 3.

• (5) In section 269 (chargeable persons for domestic top-up tax)—

• (a) in subsection (1)—

• (i) in paragraph (a), omit “that is not a body corporate”, and

• (ii) in paragraph (b), omit “that is not a body corporate” in the second place it occurs, and

• (b) omit subsections (4) to (6).

• (6) In Schedule 14 (administration of multinational top-up tax)—

• (a) in paragraph 3—

• (i) in paragraph (a) of sub-paragraph (2), omit “or a limited liability partnership”,

• (ii) in that sub-paragraph, omit paragraph (c), and

• (iii) for sub-paragraph (3) substitute—

(3) In this Schedule— (a) “limited partnership” includes an entity established under the law of a territory outside the United Kingdom that is equivalent to a limited partnership, and (b) “general partner” includes a partner of such an entity that corresponds to a general partner. (4) See also section 232A, which contains provision about the continuity of partnerships which is relevant to this paragraph. (5) Where an obligation of a partnership may be met by one of its partners and the partnership does not comply with that obligation— (a) an officer of Revenue and Customs may by notice require any such partner to meet the obligation, and (b) that partner is to be treated for that purpose as the filing member (and accordingly may be subject to any penalty for a failure to comply).

,

• (b) after paragraph 37 insert—

(37A) (1) An officer of Revenue and Customs may issue a partnership payment notice if an amount of multinational top-up tax payable by a member of a multinational group that is a partnership (including any interest on that amount) is not paid by the end of the period of three months beginning with the relevant date (see paragraph 34(7) to (9)). (2) A partnership payment notice may be issued to any person (wherever in the world they are located) who— (a) is a partner, or (b) was a partner at any time in the accounting period to which the amount payable relates. (3) A partnership payment notice is a notice requiring the recipient to pay an outstanding amount of multinational top-up tax payable by a member of the group that is a partnership by a date specified in the notice. (4) Sub-paragraphs (4) to (9) of paragraph 34 and paragraph 36 apply to a partnership payment notice as they apply to a group payment notice. (5) In this paragraph and in paragraph 37B, reference to a partner, in the case of a limited partnership, is to a general partner. (37B) (1) This paragraph applies where a partner of a member of a multinational group that is a partnership (the “payer”) makes a payment in respect of the liability to pay multinational top-up tax of the partnership (whether or not in consequence of a partnership payment notice). (2) The payer may recover the amount from the other partners. (3) In calculating the payer's income, profits or losses for tax purposes— (a) the payment is not allowed as a deduction, and (b) the reimbursement of any such payment is not to be regarded as a receipt. (4) The payment or its reimbursement— (a) is not (otherwise) to be taken into account in calculating the profits or losses of for corporation tax or income tax purposes of either the payer or the other partners, and (b) is not to be regarded as a distribution for income tax or corporation tax purposes. (5) The amount paid by the payer is to be taken into account in calculating— (a) the amount of multinational top-up tax unpaid by the partnership, and (b) the amount due by virtue of a partnership payment notice relating to the amount unpaid. (6) Similarly, any payment by the partnership or by any of the other partners of any of the amount unpaid is to be taken into account in calculating the amount due by virtue of a partnership payment notice (or by virtue of any other partnership payment notice relating to the amount unpaid). (7) In this paragraph, “for tax purposes” means for the purposes of income tax, corporation tax, multinational top-up tax or domestic top-up tax.

, and

• (c) in paragraph 39—

• (i) omit the “or” after paragraph (a) in sub-paragraph (1),

• (ii) after that paragraph insert—

(aa) a partner of a partnership makes a payment on behalf of the partnership or another partner, or

, and

• (iii) in sub-paragraph (2), after paragraph (a) insert—

(aa) deeming a payment made by a partner of a partnership to have been made by the partnership or another partner;

.

• (7) In Schedule 17 (index of defined expressions), in the table, at the appropriate places insert—

general partner (in Schedule 14)	paragraph 3(3) of Schedule 14

;

limited partnership (in Schedule 14)	paragraph 3(3) of Schedule 14

;

partnership	section 259(1);

.

Qualifying non-profit subsidiaries

3

In section 127 (excluded entities), in subsection (5)—

• (a) for paragraph (b) substitute—

(b) the revenue (see section 129(5)) of the multinational group of which the entity is a member, excluding the revenues of each member that is a non-profit organisation, a qualifying service entity or a qualifying exempt income entity— (i) would not exceed the threshold set out in section 129(4), and (ii) is less than 25% of the total revenue of the group, and

, and

• (b) omit paragraph (c) (and the “and” after it).

Charging permanent establishments of intermediate/partially-owned parent members

4

• (1) Section 128 (responsible members) is amended as follows.

• (2) In subsection (3), for paragraph (c) substitute—

(c) at least one member of the group in which it has an ownership interest, or a permanent establishment for which it is the main entity, has a top-up amount or an additional top-up amount.

• (3) In subsection (4), after “for” insert

— (a) every permanent establishment for which it is the main entity, and (b)

.

• (4) In subsection (5), for paragraph (b) substitute—

(b) at least one member of the group in which it has an ownership interest, or a permanent establishment for which it is the main entity, has a top-up amount or an additional top-up amount.

• (5) In subsection (6), after “for” insert

— (a) every permanent establishment for which it is the main entity, and (b)

.

• (6) In section 232, after subsection (3) insert—

(3A) But an entity with a permanent establishment is not to be taken as having ownership interests in that permanent establishment.

De-merged groups

5

• (1) Section 131 (whether de-merged groups meet the revenue threshold) is amended as follows.

• (2) In subsection (1), omit “if” in the second place it occurs (immediately following “A de-merged group meets condition A”).

• (3) For subsection (2) substitute—

(2) In this section “qualifying de-merger” means the separation of members of a relevant multinational group into two or more consolidated groups in an accounting period of the relevant multinational group, such that those members cease to all be consolidated by the same ultimate parent. (3) A multinational group is relevant in an accounting period if— (a) it meets condition A in section 129(2) for that period (revenue threshold exceeded in at least 2 of previous 4 accounting periods), and (b) Pillar Two rules apply to any member of the group for that period.

Adjustment for changes in accounting policies and prior period errors

6

In section 146 (adjustment for changes in accounting policies and prior period errors), in paragraph (b), for the words from “correction”, in the second place it occurs, to the end substitute “error results in a recalculation under section 217(5) (post filing adjustments of covered taxes)”.

Pension expense

7

For section 147 (accrued pension expense) substitute—

(147) (1) This section applies in an accounting period where a member of a multinational group— (a) has made contributions to a pension fund in the period, (b) has received amounts from the pension fund in the period, or (c) otherwise has amounts of income or expense relating to the pension fund reflected in its underlying profits. (2) Take the amount of income or expense (expressed as a negative number where expense) that has arisen directly in respect of the fund as reflected in the member’s underlying profits and— (a) add the sum of contributions made to the fund by the member in the period, and (b) subtract any amount received by the member from the fund in the period. (3) If the result of subsection (2)— (a) is more than nil, reduce the underlying profits by that result, or (b) is less than nil, increase the underlying profits by that result (as expressed a positive number).

Tax credits

8

• (1) After section 147 insert—

(147A) (1) The underlying profits of a member of a multinational group, and the covered tax balance of that member (see Chapter 5), are to be adjusted (if necessary) to secure that— (a) qualifying refundable tax credits are accounted for as income rather than as tax expense, (b) tax credits that are marketable transferable tax credits in relation to the member are accounted for as income rather than as tax expense, and (c) other tax credits are accounted for as tax expense rather than as income. (2) Section 148 sets out when tax credits are qualifying refundable tax credits. (3) Section 148A sets out the meaning of “transferable tax credit” and “marketable transferable tax credit”. (4) Sections 148B and 148C set out rules about the value of marketable transferable tax credits. (5) Sections 176A to 176C (in Chapter 5) set out rules about the value of tax credits that are not marketable transferable tax credits but which are transferable or were transferred (and which as a result of subsection (1)(c) are generally to be accounted for as tax expense). (6) See also sections 176D to 176F which contain special rules for tax credits received in under a tax equity partnership arrangement.

• (2) In section 148 (treatment of qualifying refundable tax credits)—

• (a) in the heading, for “Treatment” substitute “Meaning”,

• (b) omit subsection (1), and

• (c) in subsection (4)(b), omit “tax”.

• (3) After that section insert—

(148A) (1) A tax credit is a transferable tax credit in relation to a member of a multinational group if— (a) the member is— (i) the person to whom the credit was originally granted (“the originator”), or (ii) a person (“a purchaser”) who has acquired the credit (whether from the originator or anyone else), and (b) the transferability condition is met in relation to the member. (2) A transferable tax credit is a marketable transferable tax credit in relation to a member of a multinational group if— (a) it is a transferable tax credit, and (b) the marketable condition is met in relation to the member. (3) Those conditions are met differently depending on whether the member is the originator or a purchaser. (4) The transferability condition is met— (a) in relation to the originator if, under the law of the territory in which the credit was granted, credits of that type may be transferred to a person or entity that is not connected with originator before the end of 15 months after the end of the accounting period in which the credit is granted, and (b) in relation to a purchaser if, under the law of that territory, credits of that type may be transferred to a person or entity that is not connected with the purchaser— (i) under the same or similar conditions as would apply to the originator, and (ii) before the end of the accounting period in which it was transferred to the purchaser. (5) The marketable condition is met— (a) in relation to the originator, if— (i) the credit is transferred to a person or entity that is not connected with the originator before the end of 15 months of the accounting period in which the credit was granted at a price equal to or in excess of 80% of its net present value, or (ii) similar credits are traded between persons or entities that are not connected to each other before the end of 15 months of the accounting period in which they are granted, and are typically traded at a price equal to or in excess of 80% of their net present value, and (b) in relation to a purchaser, if the purchaser acquired the credit from a person or entity that is not connected to the purchaser at a price equal to or in excess of 80% of its net present value. (6) Subsections (7) and (8) apply for the purposes of determining the net present value of a tax credit. (7) In making that determination, assume that the entity that holds it will be able to use it in the accounting periods in which it may be used. (8) The discount rate to be used in making that determination is to be determined by reference to the return on debt instruments that are issued by the government of the territory in which the credit was granted— (a) that have— (i) the same, or a similar, maturity to the period over which the credit is to be used, or (ii) in a case in which the credit is to be used over a period exceeding 5 years, a maturity of 5 years, and (b) that are issued— (i) in relation to a credit that has been transferred, in the accounting period in which the credit was transferred, or (ii) in relation to a credit held that has not been transferred, in the accounting period in which it was granted. (9) References in subsections (6) and (8) to an accounting period are— (a) in relation to determining net present value in connection with determining whether the marketable condition is met by the originator, an accounting period of the originator, and (b) in relation to determining net present value in connection with determining whether the marketable condition is met by a purchaser, an accounting period of the purchaser. (10) Where a transferable tax credit is also a qualifying refundable tax credit, it is to be treated as not being a transferable tax credit for the purposes of this Part. (148B) (1) The underlying profits of a member of a multinational group that is the originator in relation to a marketable transferable tax credit are to be adjusted to secure that the value of marketable transferable tax credits it holds, and has held, as originator are reflected as follows. (2) Where the credit is not transferred before the end of 15 months after the end of the accounting period in which it was granted, the full value of the credit is to be recognised as income. (3) Where the credit is subsequently transferred for consideration which is less than the value of the credit, the difference between the value of the credit and the consideration received for its transfer is to be recognised as a loss in the accounting period in which it is transferred. (4) Where the credit is transferred before the end of 15 months after the end of the accounting period in which the credit is granted, the consideration for the transfer (rather than the value of the credit) is to be recognised as income. (5) Where the credit has not been transferred, and was not fully used, before its expiry, the value of so much of the credit as has not been used is to be reflected as a loss in the accounting period in which the credit expired. (148C) (1) The underlying profits of a member of a multinational group that is the purchaser in relation to a marketable transferable tax credit are to be adjusted to secure that the value of marketable transferable tax credits it holds, and has held, as purchaser are reflected as follows. (2) On using an amount of the credit in an accounting period, the amount given by subsection (3) is to be recognised as income. (3) That amount is the amount given by multiplying— (a) the amount used divided by the full value of the credit, by (b) the amount given by subtracting the purchase price of the credit from the full value of the credit. (4) On transferring the credit, the amount in subsection (5) is to be reflected in the underlying profits for the accounting period in which the transfer occurred— (a) if positive, as a gain, or (b) if negative, as a loss. (5) That amount is the amount given by subtracting— (a) the sum of— (i) the purchase price of the credit, and (ii) any amounts recognised as income in accordance with subsection (2) (whether in that accounting period or a previous accounting period), from (b) the sum of— (i) the amount of the credit that has been used, and (ii) the consideration for the transfer. (6) Where the credit has not been transferred, and was not fully used, before its expiry, the amount in subsection (7) is to be reflected as a loss in the accounting period in which the credit expired. (7) That amount is the amount given by subtracting— (a) the amount of the credit that was used, from (b) the sum of the purchase price of the credit and any amounts recognised in accordance with subsection (2).

• (4) In section 175 (amounts excluded from covered tax balance), in subsection (2), in paragraph (c), after “credit”, in the second place it occurs, insert “, or in respect of a marketable transferable tax credit,”.

• (5) In section 176 (amounts to be reflected in covered tax balance), in subsection (2)—

• (a) in paragraph (d), in sub-paragraph (i), after “credit” insert “or a marketable transferable tax credit”, and

• (b) in paragraph (e), after “credit” insert “or a marketable transferable tax credit”.

• (6) After section 176 insert—

(176A) (1) Sections 176B and 176C make provision about “non-marketable transferable tax credits”. (2) A tax credit held by a member of a multinational group that is the originator of the credit is a non-marketable transferable tax credit if— (a) it may be transferred to another person or entity, and (b) it is neither a marketable transferable tax credit nor a qualifying refundable tax credit. (3) A tax credit held by a member of a multinational group as a purchaser of the credit is a non-marketable transferable tax credit if it is neither a marketable transferable tax credit nor a qualifying refundable tax credit. (4) In this section and in sections 176B and 176C “originator” and “purchaser” are to be construed in accordance with section 148A(1)(a). (176B) (1) The covered tax balance of a member of a multinational group that holds a non-marketable transferable tax credit as originator is to be adjusted to secure that the value of the credit is reflected as follows. (2) The value of the tax credit is to be reflected as it is used. (3) If the credit is transferred (after the end of the period of 15 months after the accounting period in which the credit is granted), the consideration for the transfer is to be reflected as a credit in the accounting period in which the transfer occurred. (176C) (1) The covered tax balance of a member of a multinational group that holds a non-marketable transferable tax credit as purchaser is to be adjusted to secure that the value the credit is reflected as follows. (2) On using an amount of the credit, the amount given by subsection (3) is to be reflected as a credit in the covered tax balance for the accounting period in which it is used. (3) That amount is the amount given by multiplying— (a) the amount used divided by the full value of the credit, by (b) the amount given by subtracting the purchase price of the credit from the full value of the credit. (4) On transferring the credit, the amount in subsection (5) is— (a) if positive, to be reflected as a credit in the covered tax balance for the accounting period in which the transfer occurred, or (b) if negative, to be reflected as a loss in the underlying profits of the member for that period. (5) That amount is the amount given by subtracting— (a) the sum of— (i) the purchase price of the credit, and (ii) any amounts recognised reflected in the covered tax balance in accordance with subsection (2) (whether in that accounting period or a previous accounting period), from (b) the sum of— (i) the amount of the credit that has been used, and (ii) the consideration for the transfer. (6) Where the credit has not been transferred, and was not fully used, before its expiry, the amount in subsection (7) is to be reflected as a loss in the underlying profits of the member for the accounting period in which the credit expired. (7) That amount is the amount given by subtracting— (a) the amount of the credit that was used, from (b) the sum of the purchase price of the credit and any amounts recognised in accordance with subsection (2).

Adjustments for companies in distress

9

• (1) Section 151 (adjustments for companies in distress) is amended as follows.

• (2) In subsection (1)—

• (a) in the words before paragraph (a), after “group” insert “for an accounting period”,

• (b) omit the “and” after paragraph (a),

• (c) after that paragraph insert—

(aa) that release is reflected in the underlying profits of the member for that period,

, and

• (d) after paragraph (b) insert

, and (c) the filing member of the group elects that this section should apply to the member for that period.

• (3) In subsection (6)(c) for “deferred tax assets” substitute “local tax attributes”.

• (4) After subsection (6) insert—

(6A) For the purposes of subsection (6)(c) “local tax attributes” means any tax attributes (which may include foreign tax credits) of the member that are recognised under the law of the territory in which the member is located (whether or not such tax attributes are excluded from the member’s covered tax balance).

• (5) For subsection (7) substitute—

(7) Where more than one debt is released at the same time, the debts released are to be treated as a single aggregate amount for the purpose of assessing whether conditions in this section are met (for example, whether the member’s assets exceed its liabilities at any time).

• (6) After that subsection insert—

(8) Paragraph 2 of Schedule 15 (annual elections) applies to an election under subsection (1)(c).

Adjustments where life assurance business carried on

10

• (1) Section 152 is amended as follows.

• (2) In subsection (2), for “formed part of the member’s tax expense amount” substitute “been included in the member’s covered tax balance”.

• (3) For subsection (4) substitute—

(4) In this section “life assurance business” means— (a) a life assurance business within the meaning of section 56 of FA 2012, or (b) a business regulated as a life assurance business under the law of a territory outside the United Kingdom.

Exclusion of certain insurance reserve movement expense

11

In section 153 (exclusion of certain insurance reserve movement expense), in subsection (1) after “excluded dividends” insert “falling within section 141(2)(b)”.

Permanent establishment income and expense attribution

12

• (1) Section 159 (permanent establishment income and expense attribution) is amended as follows.

• (2) In subsection (1), for the words from “only” to the end substitute “—

(a) reflect all amounts of income and expense that are attributable to it in accordance with the tax treaty under which it is treated as a permanent establishment, and (b) do not reflect amounts attributable to its main entity in accordance with that treaty.

• (3) In subsection (2), for the words from “only” to the end substitute

— (a) reflect all amounts of income and expense that are attributable to it in accordance with the law of the territory in which the member is located, and (b) do not reflect amounts attributable to its main entity in accordance with the law of that territory.

• (4) In subsection (3), for the words from “only” to the end substitute

— (a) reflect all amounts of income and expense that would be attributed to it in accordance with Article 7 of the OECD tax model, and (b) do not reflect amounts that would be attributed to its main entity in accordance with the OECD tax model.

• (5) After that subsection insert—

(4) Amounts are to be reflected (or, as the case may be, not reflected) in the underlying profits of a permanent establishment in accordance with subsections (1) to (3) whether or not— (a) in the case of an amount of income, it is subject to tax or not, or (b) in the case of an amount of expense, it is deductible or not.

Election to spread certain capital gains

13

• (1) Section 163 (election to spread capital gains over five years) is amended as follows.

• (2) In subsection (1), for “collectively” substitute “and those preceding periods are referred to collectively as”.

• (3) In subsection (2)—

• (a) for Step 1 substitute—

• Step 1 For each standard member of the group in the territory in the first accounting period of the look-back period (“the carry-back period”), determine whether it has net losses in respect of the disposal of local tangible assets (ignoring any losses in relation to which these steps have previously been carried out).

, and

• (b) for Steps 9 to 11 substitute—

• Step 9 Determine which of the standard members of the group (“current gain members”) located in the territory have net gains from the disposal of local tangible assets in the election period. A current gain member is not to be regarded as a current gain member in any accounting period in which— it is not a standard member of the group, or it is not located in the territory.
• Step 10 For the election period and each accounting period that is in the look-back period, adjust the underlying profits for that period (“the adjustment period”) of each current gain member by adding the amount given by multiplying— the result of Step 8, by the amount given by dividing— the net gains of the current gain member from the disposal of local tangible assets in the election period, by the sum of net gains from the disposal of local tangible assets in the election period of all current gain members in the adjustment period.
• Step 11 Where there are no current gain members in an accounting period in the look-back period, adjust the underlying profits for that period of each standard member located in the territory for that period by adding the amount given by multiplying— the result of Step 8, by the amount given by dividing 1 by the number of standard members of the group in the territory in that accounting period.
• Step 12 Where there are no standard members of the group in the territory in one or more accounting periods in the look-back period, further adjust the underlying profits for the election period of each current gain member by adding the amount given by multiplying— the result of Step 8 multiplied by the number of accounting periods in the look-back period in which no standard members of the group were located in the territory, by the amount given by dividing— the net gains of the current gain member from the disposal of local tangible assets in the election period, by the sum of net gains from the disposal of local tangible assets in the election period of all current gain members.

• (4) In subsection (3), omit “standard”.

Transparent entities etc

14

• (1) Section 168 (underlying profits of transparent and reverse hybrid entities) is amended in accordance with sub-paragraphs (2) to (8).

• (2) In subsection (2), in paragraph (b), after territory insert “as a result of being tax resident in that territory”.

• (3) In subsection (3), after “entity” insert “or individual”.

• (4) In subsection (6), in paragraph (a), after “is” insert “an entity that is”

• (5) For subsection (9) substitute—

(9) Where underlying profits of M— (a) are allocated to an individual or an entity that is not a member of the group of which M is a member, or (b) would be allocated to such an individual or entity if M were regarded as tax transparent in the territory in which the individual or entity is located, those profits are to be excluded from the adjusted profits of M.

• (6) In subsection (10), after “entity” insert “or an individual”.

• (7) In subsection (11), in the words before paragraph (a), for “is located” substitute “was created, R is not tax resident in any territory”.

• (8) After that subsection insert—

(12) For the purposes of applying this section in relation to a multinational group whose ultimate parent is a flow-through entity, the ultimate parent is to be treated as if it were not regarded as tax transparent in the territory in which it is located.

• (9) In section 170 (adjustments for ultimate parent that is a flow-through entity)—

• (a) in subsection (2), for “an ownership interest (direct or indirect)” substitute “a direct ownership interest”, and

• (b) after that subsection insert—

(2A) Where profits are allocated to the ultimate parent as a result of section 168 (underlying profits of transparent and reverse hybrid entities), those profits are to be regarded, for the purposes of this section, as profits to which holders of ownership interests in the ultimate parent are entitled (to each in proportion to the proportion of those profits to which they would have been entitled had those profits actually accrued to the ultimate parent).

• (10) In section 238 (tax transparency of entities)—

• (a) for “if” substitute “to the extent that”, and

• (b) for “and”, in both places it occurs, substitute “or”.

Covered taxes

15

In section 173 (covered taxes), in subsection (1)(c) for “of the member” substitute “in which the tax is imposed”.

Tax equity partnerships

16

• (1) After section 176C (as inserted by paragraph 8), insert—

(176D) (1) Where— (a) a member of a multinational group is an investor in a tax equity partnership arrangement, and (b) an election under section 165 (excluded equity gains and losses included) applies in relation to the member for an accounting period, qualifying flow-through tax benefits provided to the member under that arrangement in that period are to be excluded from the covered tax balance of that member for that period. (2) “Flow-through tax benefits” means tax credits, other than qualifying refundable tax credits, and the value of amounts of tax deductible losses made available to be used by an investor in a tax equity partnership arrangement under that arrangement (whether or not those credits or losses are used by the investor). (3) Section 176E (proportional amortisation method) applies for the purposes of determining the extent to which flow-through tax benefits are “qualifying” where— (a) in determining the underlying profits of the investor, the proportional amortisation method is used to account for the arrangement, or (b) the filing member of the multinational group of which the investor is a member has elected that section 176D should apply for those purposes in relation to the member. (4) Otherwise, section 176F (subtraction method) applies for those purposes. (5) For the purposes of this Part, a member of a multinational group is an investor in a tax equity partnership arrangement if— (a) the member has made an investment in an entity that is tax transparent in the territory in which the member is located, (b) the investment is treated as an equity interest for tax purposes in the territory in which the member is located, (c) the investment would, under an authorised accounting standard of the territory in which the entity operates, be treated as an equity interest, (d) the entity is not a member of the multinational group, and (e) it is reasonable to expect, at the time of making the investment, that the return on the investment would be negative in the absence of the provision of flow-through tax benefits. (6) But a member of a multinational group is not to be regarded as an investor in a tax equity partnership arrangement if— (a) the investment in the entity does not represent a genuine economic interest in that entity such that the member is exposed to the possibility of a loss on the investment, or (b) the territory in which the member is located limits the use of tax equity partnership arrangements to arrangements that involve a multinational group subject to multinational top-up tax or its equivalent under the law of a territory outside the United Kingdom. (7) Flow-through tax benefits provided to a member of a multinational group in an accounting period that are not qualifying are to be reflected as a credit in the covered tax balance for that period. (8) Flow-through tax benefits (whether qualifying or not) provided to a member of a multinational group are not to be reflected in the underlying profits of that member, even if that would be the effect of the election under section 165. (9) For the purposes of subsection (3)(a), the “proportional amortisation method” means a method of accounting under which— (a) the initial capital investment in the arrangement is amortised over the term of the investment with the amortisation expense for an accounting period based on the proportion of the flow-through tax benefits expected to be provided over the term of the arrangement that are expected to be provided in that period, and (b) the difference between the flow-through tax benefits received in an accounting period and that amortisation expense for that period is reflected as tax expense. (10) For the purposes of this section and sections 176E and 176F, the value of an amount of tax deductible losses made available to be used by an investor is given by multiplying the amount multiplied by the tax rate that applies to the investor. (11) Paragraph 2 of Schedule 15 (annual elections) applies to an election under subsection (3)(b). (176E) (1) Where this section applies, to determine the extent to which flow-through tax benefits provided to an investor in an accounting period under a tax equity partnership arrangement are qualifying, take the following steps— - Step 1 Determine the amount of capital investment provided by the investor to the arrangement at its commencement. - Step 2 Divide the flow-through through tax benefits provided under the arrangement in the accounting period by the total flow-through tax benefits expected to be provided over the whole term of the arrangement. - Step 3 Multiply the result of Step 1 by the result of Step 2. - Step 4 Add the following together— the amounts, if any, of tax credits made available to be used by the investor under the arrangement in the accounting period; the value of the amounts, if any, of tax deductible losses made available to be used by the investor under the arrangement in the accounting period; the amounts, if any, of distributions made to the investor in the accounting period; the amounts, if any, received by the investor for the sale of any part of its investment in the arrangement in the accounting period. - Step 5 If the result of Step 3 is equal to or greater than the result of Step 4, all of the flow-through tax benefits provided under the arrangement in the accounting period are qualifying. Otherwise proceed to Step 6. - Step 6 Subtract the result of Step 3 from the result of Step 4. - Step 7 The amount of the flow-through benefits provided under the arrangement in the accounting period that is qualifying is the amount given by reducing the amount of those benefits (but not below nil) by the result of Step 6. (2) Accordingly, the amount by which those benefits are reduced in accordance with Step 7 represents non-qualifying flow-through tax benefits which are to be reflected as a credit in the investor’s covered tax balance. (176F) Where this section applies, to determine the extent to which flow-through tax benefits provided to an investor in an accounting period under a tax equity partnership arrangement are qualifying, take the following steps— - Step 1 Determine the amount of capital investment provided by the investor to the arrangement at its commencement. - Step 2 Subtract the following from that amount— the amounts, if any, of tax credits made available to be used by the investor under the arrangement since the commencement of the arrangement, other than tax credits that are not qualifying refundable tax credits that were made available in the accounting period; the value of the amounts, if any, of tax deductible losses made available to be used by the investor under the arrangement since its commencement, other than losses made available in the accounting period; the amounts, if any, of distributions made to the investor since the arrangement’s commencement; the amounts, if any, received by the investor for the sale of any part of its investment in the arrangement. - Step 3 If the result of Step 2 is nil or less, no flow-through tax benefits provided under arrangement in the accounting period are qualifying. If the result of that step is more than nil, proceed to Step 4. - Step 4 Subtract the flow-through tax benefits provided to the investor in the accounting period under the arrangement from the result of Step 2. - Step 5 If the result of Step 4 is nil or greater, all of the flow-through tax benefits provided under the arrangement in the accounting period are qualifying. Otherwise, the amount of those benefits that is qualifying is the amount of those benefits that when subtracted from the result of Step 2 would give a result of nil.

• (2) In Schedule 15 (elections), in paragraph 2(1), before paragraph (a) insert—

(za) section 176D(3)(b);

.

Reallocation of tax expense

17

• (1) In section 177 (permanent establishments), in subsection (1), after “establishment”, in the second place it occurs, insert “(and is to be regarded as qualifying current tax expense of the permanent establishment for the purposes of applying section 175(2)(a))”.

• (2) Section 178 (reallocation of tax expense) is amended as follows.

• (3) In subsection (1), in the words after paragraph (b) after “qualifying” insert “current”.

• (4) After subsection (1) insert—

(1A) Where— (a) a member of a multinational group has an amount of qualifying current tax expense, (b) that amount is in respect of profits not included in the member’s underlying profits, and (c) if those profits had been included in the member’s underlying profits, a corresponding amount of adjusted profits would have been allocated to another member of the group (“O”) under section 167 or 168, that qualifying current tax expense is to be allocated to O (and is to be regarded as qualifying current tax expense of O for the purposes of applying section 175(2)(a)). (1B) Section 175(2)(a) (exclusion of amounts relating to income or gains not included in adjusted profits) applies to an amount of qualifying current tax expense allocated in accordance with subsection (1) as if— (a) the reference to the member’s adjusted profits were to the adjusted profits of the member from whom the amount of qualifying current tax expense was allocated, and (b) profits allocated from that member to O under section 167 or 168 were not excluded from the adjusted profits of that member.

• (5) In subsection (2), in the words before Step 1, after “O” insert “(under subsections (1) and (1A))”.

• (6) After subsection (4) insert—

(5) Where an amount of qualifying current tax expense would have been allocated to O, but the amount allocated is limited as a result of subsection (2) the amount not allocated remains with the member from whom it otherwise would have been allocated. (6) But if an amount would, ignoring this subsection, remain with the member from whom it would have otherwise been allocated, and that amount relates to income or gains that are not included in the adjusted profits of O, that amount is to be excluded from the covered tax balance of both the member and O.

• (7) In section 179 (controlled foreign company tax regimes)—

• (a) after subsection (1) insert—

(1A) Qualifying current tax expense allocated to F is to be regarded as qualifying current tax expense of F for the purposes of applying section 175(2)(a).

• (b) after subsection (3) insert—

(3A) Where an amount of qualifying current tax expense would have been allocated to F but the amount allocated is limited as a result of subsection (2), the amount not allocated remains with C. (3B) But if an amount would, ignoring this subsection, remain with C and that amount relates to income or gains that are not included in the adjusted profits of F, that amount is to be excluded from the covered tax balance of both C and F.

Controlled foreign company tax regimes

18

• (1) Section 179 (controlled foreign company tax regimes) is amended as follows.

• (2) In subsection (1), in paragraph (b), for “controlled foreign company” substitute “CFC entity”.

• (3) In subsection (4), after the definition of “controlled foreign company tax regime” insert—

• “CFC entity”, in relation to a member of a multinational group who is subject to a controlled foreign company tax regime, means— a controlled foreign company in relation to that member, a permanent establishment of such a controlled foreign company, or an entity whose profits are treated, for the purposes of the regime, as the profits of such a controlled foreign company;

.

• (4) In section 180 (blended CFC regimes)—

• (a) in subsection (2)(b), omit “blended”,

• (b) in subsection (4), omit “blended” in the third place it occurs,

• (c) in subsection (5)—

• (i) in the words before paragraph (a), omit “blended” in the second place it occurs, and

• (ii) in paragraph (b), omit “blended”,

• (d) in subsection (6)(a), omit “blended”,

• (e) in subsection (8)—